China's securities regulator plans to relax controls on Hong Kong and overseas listings for Chinese companies and will push for issues of yuan-denominated shares in the offshore yuan market, its vice chairman, Yao Gang, said on Monday.

The move could export to Hong Kong the surge in capital markets activity that has made Shenzhen, where most of China's startups and small and medium-sized companies go public, a teeming IPO hub in Asia Pacific.

China holds a tight grip on its securities and foreign exchange market, with companies at the will of regulators to raise funds locally or abroad, which can often delay the timing of capital-raising plans and prompt some issuers to tap markets even during volatile times because they may not have another chance any time soon.

The China Securities Regulatory Commission will revise overseas listing rules this year to simplify procedures and lower thresholds, providing good conditions for small to medium-sized and privately-owned Chinese companies to list overseas, Yao said.

China was the world's biggest IPO market in 2011, raising a combined 286 billion yuan (29.7 billion pound) through share sales in Shanghai and Shenzhen, according to accounting firm PricewaterhouseCoopers.

Shenzhen's ChiNext and Small & Medium Enterprise boards have seen a surge in activity in recent years, helping catapult Chinese firms Ping An Securities and Guosen Securities to the top two positions in fees in the Asia Pacific region, surpassing international rivals like UBS and Goldman Sachs .

Most state-linked companies such as ICBC <1398.HK>, the world's most valuable bank, do dual listings in Hong Kong and Shanghai. Any share sale in China requires regulatory approval and must be completed within months of the nod being given.

A pilot scheme that allows offshore yuan to be transferred back to the mainland to invest in capital markets, known as RQFII, will also be expanded, he said during a speech at the Asian Financial Forum.

The various schemes that allow investors to move their money in and out of Chinese capital markets will also be expanded by raising the existing caps allowed under the programmes, Yao said, without giving further details.

Although the currency is not fully convertible, we have implemented the QFII and QDII schemes and will continue to expand these programmes, he said.

QFII allows qualified foreign investors to put money in China's capital markets, while QDII allows qualified domestic investors to take their money out of the country.

Separately, Japan's vice minister of finance, Takehiko Nakao, said the country's banks were willing to step in should European lenders decide to pull out of Asia to shore up their balance sheets back home.

I talked to senior officials at the banks recently, and they say they are willing to provide more money for investment and trade, Nakao said.

They are also thinking about buying some assets, but this is really difficult. The banks did so in the late 1980s and that was not very successful, so they must be very prudent.

The cost of borrowing in U.S. dollars has been rising since the fourth quarter of last year as more banks begin hoarding cash in the region to prepare for any European pullout and tightened capital regulations.

Standard Chartered's Asia chief executive, Jaspal Bindra, said on January 5 he was already seeing early signs of European banks pulling back from loans in Asia.

(Additional reporting by Elzio Barreto; Editing by Chris Lewis, Jonathan Hopfner and Matt Driskill)